The New Consumer Financial Protection Bureau: Changes Ahead but Already Under Fire

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By David Silver

Later today, President Obama is expected to announce that Elizabeth Warren will oversee the creation of the new Consumer Financial Protection Bureau (CFPB).

The Dodd-Frank financial overhaul law was enacted back in July, creating the CFPB and revamping regulations across the financial sector. The CFPB has broad powers to write and enforce rules related to credit cards and mortgages.

In creating the agency, regulators consolidated powers from several other existing agencies, such as the Federal Reserve, and the process of moving these powers and personnel is what officials are expected to spend the next 10 months doing. The government is also setting July 2011 as the deadline for the new agency to be up and running.

It is unclear what Ms. Warren's role would be after the agency is up and running. The law says only the director, a position that needs to be confirmed by the Senate, can write the rules and guidelines issued by the agency. The White House could still decide to nominate Ms. Warren for the five-year slot as director.

However, in an interesting move, President Obama has decided to skip the confirmation process for Ms. Warren off the bat. Seems to me that for the CFPB to run properly it probably would be a good idea to have the same person that designed the solution there to help troubleshoot the problems that will arise over the first few years, I mean we are talking about another government agency after all.

David Hirshmann, who runs the Chamber of Commerce's Center for Capital Market Competitiveness said the following:

By not allowing Ms. Warren's nomination to be considered through the regular order of the full Senate confirmation process, the administration has circumvented one of the very few checks on a big new agency that already has been given an unprecedented concentration of regulatory powers. This maneuver is an affront to the pledge of transparency and consumer protection that's purported to be the focus of this new agency.

I don't know enough about Ms. Warren to have an opinion, but it seems a bit odd that the point of this agency is to improve the transparency of operations for banks, credit cards, and mortgages, however, the Administration is ignoring one of the few rules it will face. Even people in favor of the CFPB were mixed on the actions taken by the Administration.

David Arkush, who runs a Congressional transparency project at Public Citizen, a left-leaning advocacy group, said it was disappointing that a formal nomination did not appear imminent, said:

Warren is confirmable, and a fight over her confirmation is worth having.

Disclosure: None